John Horgan on trade, carbon tax and his energy plan

Here is the full version of Tom Fletcher’s year-end interview with NDP leader John Horgan. An edited version appears in Black Press newspapers this week.

TF: We had a federal election this year. Federal NDP leader Thomas Mulcair rejected the Trans Pacific Partnership sight unseen, and endorsed letters from Unifor and CUPE saying this is a bad deal. Does that now leave the NDP branded as being against Pacific Rim trade?

JH: No, I don’t think so, and what I said at the time and I say today was that I support trade. We’re a trade-centred province. We’re looking across the ocean at the largest market the world has known, and I support getting our products to higher-priced markets.

But having said that, the B.C. Liberals embraced TPP without even having seen it. And my trade spokesperson, Bruce Ralston, one of the better informed people in the legislature regardless of your political perspective, was in discussion with [B.C. International Trade Minister] Teresa Wat, who said she had not read the document, nor had B.C. been involved in any meaningful way in the development of the document. So what I did was ask my critics in areas where there would be potential conflicts with existing industries, like agriculture, like intellectual property, like the tech sector. I said go out and find out what the people in B.C. who depend on trade think, and we haven’t really got a position back on that.

TF: The B.C. International Trade ministry and the former federal minister Ed Fast assured me that existing restrictions on log exports were preserved and we have better lumber access to Japan and others. Do you accept that?

JH: I don’t. And I’m going to wait and see what I hear from the sector.

TF: NDP and unions have historically been protectionist, and that’s something that goes back to the roots of the CCF. Do you see any need today to modernize the B.C. party?

JH: When it comes to trade, I think we have modernized. And who was the first premier to go on a trade mission from British Columbia? It was Dave Barrett. And now there has been a succession of premiers since him to make regular visits to other markets to try to stimulate economic activity here at home.

Our softwood lumber sector is not sustained by internal markets, it’s sustained by being able to get our products to higher priced markets. Rather than focus on the TPP, which is still before a whole host of nations, much less as a subnational government here in B.C., I’m more interested in the potential consequences of the acceleration of aggressive trade tactics from U.S. lumber interests here in B.C.

But that too is changing. When you look at Interfor, Canfor, West Fraser, they’ve been investing significantly in U.S. interests. So they’re on both sides of the softwood lumber debate now, and whether they’ll have a critical mass in the U.S. I have no idea. You could ask them.

But those are the trade issues that are compelling to me in the next 12 months. How do we maintain our position in North America and continue to find markets offshore.

But on the raw log side, mostly a coastal issue, I have maintained since the day I was elected, I just don’t believe we should be exporting jobs in the form of logs if there are opportunities to give to local manufacturing entrepreneurs to add value, to add wealth and keep that here.

If the TPP maintains our ability to manage that raw product, then I would support that for sure.

TF: Carbon tax. Your party supports that now, but you don’t like the revenue neutral approach. Do you support increasing the rate?

JH: I’ve looked carefully at the report tabled by the premier’s group, which is a vast array of British Columbians, and there was a lot of water put into the wine to get to the position they got to. And what I’m comfortable with is that the date that they’ve selected for a ramping up of the carbon tax is 2018, which will be a year after the next provincial election. So if I’m successful and form a government, I’ll have time to look at tax policy broadly to see if we can make improvements in the carbon tax.

For me, and I think for most British Columbians, the model that Alberta has adopted of taking revenues and driving them into industries, or activities like transit, that will reduce emissions over time.

The Campbell model was such that he wanted to make sure that everybody was comfortable with the tax. And those who don’t pay tax largely, industry, were able to write off any fleet costs. So they got a double tax break really, because they were able to write off their gas costs and they saw a reduction in income tax.

I want to see a concerted effort to reduce our emissions, and carbon pricing appears to be an appropriate way to do that. When you go back and look at the basket of policies that Campbell and [former finance minister] Carole Taylor adopted, the bill we voted against was the carbon tax. We supported cap and trade. We supported low-emission vehicle standards, low emission fuel standards, and the other issues that came with that package of policy initiatives that Campbell and Taylor brought forward.

With respect to the tax, it was the revenue neutrality part of it that we thought was inappropriate. If you’re going to be taking money for using carbon, you should take that revenue and drive it into reducing carbon, which would then reduce dependence on the tax. You would want to eliminate the carbon tax over time, not make it a cash cow. If your objective is to truly reduce emissions, then at some point the tax will be so effective, so the thinking goes, that there won’t be any use of fossil fuels.

TF: I hear from people in the Interior and the North who don’t believe the income tax is reduced, and they don’t believe me when I tell them the last couple of years the government has actually lost money on the carbon tax. But that is the case, and are you not implying that those tax rates will rise, at least to some extent, when you start putting revenue somewhere else?

JH: There’s a whole bunch of revenue initiatives that make up the B.C. budget. There are sales taxes, the property transfer tax, which is sustaining the government today, the [natural gas] royalties and land leases that were worth billions in 2005-06 are now in some cases costing us money through tax credits that were compiled over time by those who were using directional drilling credits and summer drilling credits and so on.

So revenue differs from cycle to cycle. Forestry revenue is starting to uptick, even though volumes are staying about the same. But the fact that the low dollar allows us to get more Canadian dollars into the coffers, even though we’re selling in American dollars, assists us in the long term.

So how we’ll manage in 2017 Medical Services Plan premiums, which I firmly believe is a regressive tax that’s been going up year after year under the Liberals, the only province in Canada that has MSP premiums. I’m not suggesting in this interview that we eliminate them on the first day of a new administration, but I do think we need to find different ways to fund programs.

I’m going to be looking at a whole range of tax measures to see how I can make them fairer and still deliver the services that people expect.

TF: But you are going to raise income tax on businesses and individuals, right?

JH: I’m going to look at the situation the books are in when I have a chance to look at them, and then I’ll make those decisions. I’ll be very clear going into the election campaign, assuming the Liberals table a credible budget in 2017.

TF: Natural gas price and volume continue to go down, commodities generally, prices continue to go down, supply of oil and gas keeps going up. What’s your take on the prospects for LNG after the year we’ve had?

JH: Not good. I’ve always said that the market will determine whether we proceed or don’t proceed. I’ve been saying that since 2007.

It’s always been in my view, the price that will determine whether investors drop down multi-billions of dollars in a far-away place to provide a product that is not developed here. Brownfield opportunities have moved very quickly in the U.S. Changing import facilities to export facilities is a whole lot easier and cheaper than starting from scratch.

Getting to the coast is a challenge for fossil fuels, and the last LNG price point I saw delivered in Asia was $5.70 a unit. You’re not going to make money at that price, even with rock-bottom natural gas prices here in B.C.

I’m not optimistic, and I don’t expect that the premier is either. She’s saying less and less on LNG and more and more of whatever else comes into her head on a given day.

I’m encouraged by that. I’ve been talking with various sectors, manufacturing, mining, which is in tough as well. The B.C. Liberals’ Jobs Plan called for nine new mines, and we’ve seen eight mines shuttered since that announcement was made. They’re not meeting targets, but yet they seem to prop them up as if they were sacrosanct and unmovable.

TF: Speaking of the Jobs Plan, we’ve just had a couple of announcements, $100 million in financing for tech startups, which your critic was pleased about, and an agriculture and food strategy. Are we going to see some more Jobs Plan advertising in the new year?

JH: I think we are, and the B.C. Liberals have started advertising. It’s the Christmas season, the federal election is over, there are two sets of ads running now. I think these ads are self-promotion. These are not informing the public on information that they really need.

There’s always advertising that comes out of the budget, and I think that’s fair. I think you need to be able to say to the public, these are the choices we’re making for this fiscal year. This is why we’re doing what we’re doing.

But if it’s just smiling people with hardhats on, I think we’re going to have something to say about that.

On the tech fund, it’s a fraction of what the sector was looking for, but it’s a start. What encourages me about that is that the government is starting to move away from LNG as the only thing they want to talk about, and I think that’s good for the economy.

I met with economists from the Business Council of B.C. some weeks ago, and they did not predict an above-three per cent growth rate as the Conference Board of Canada just did. But I understand the Conference Board’s numbers are predicated on continued progress on the LNG front. And I don’t know how anyone who’s been observing that sector could come to that conclusion based on the oversupply and the lack of demand. But if we hit three per cent I’ll be surprised, and I think most of the economists will be as well.

TF: Is that just the reality in politics in Canada now, that we have a year and a half of taxpayer-funded, self-serving ads?

JH: It certainly seems that way. The federal Conservatives had a good run at it, the B.C. Liberals did enormous advertising before the last election campaign. We’ll be calling them out on it, but again, how much does the public care about this stuff.

They wouldn’t do it if it didn’t work, so clearly someone’s focus tested, what’s the downside of spending public money telling the public how good you are?

It’s my job as leader of the opposition to highlight the gross waste of public resources that could be better spent providing services to people, which is the function of government. It’s not to hurt one sector and provide benefits to another.

TF: Will you swear on a stack of audited public accounts that if you get elected premier you will not do that kind of self-serving advertising?

JH: We will have statements going into the election campaign. There was a proposal coming out of Ontario that you had to certify that the ads you were putting forward were in the public interest, and I think that’s good policy.

TF: Independent review?

JH: Exactly. I think if you have an independent test, that gives the public some comfort, that if my government’s talking to me, they’re talking to me for a reason and it’s not just to pat themselves on the back.

TF: Your energy plan, electric vehicles, conservation, retrofits …

JH: New technologies, squeezing as much as we can out of existing facilities.

TF: Isn’t all that going on already?

JH: Well, it is, but it’s been declining on the B.C. Liberal watch. The LiveSmart program, cancelled. Just last week, 20 more people on the PowerSmart conservation program laid off. so as much as they still talk about conservation, it’s still part of the mandate for BC Hydro, they have more electricity than they know what to do with.

A quarterly report just came out. Residential demand again declining. We have seen over the past 10 years, every single year Hydro has made a projection and every single year they’ve been wrong. We are using less electricity today than we were in 2008, in industrial, commercial and residential sectors. So why would you spend $9 billion or more to get new supply before you need it [on Site C dam].

Former premier Bill Bennett introduced the B.C. Utilities Commission, and Bob McClelland was his minister. These were not doctrinaire socialists, these were practical people who said we need to protect ratepayers from a public monopoly that is driven by political contingencies.

And that is why it is so critically important to me that before we get $1 billion into the ground, if we don’t need the energy, and it’s BC Hydro’s documents that say it, why would you rush it unless you’re just doing it for a picture with some hardhats?

And if the premier and her buddy from the Kootenays [Energy Minister Bill Bennett] are so convinced that this is the best course of action, certainly you could defend that to someone other than a Liberal.

TF: We’ve got an excess of electricity, and it looks like we’ll have Site C dam whether you want it or not, is it possible to sell more of this excess clean power to Alberta?

JH: Of course. The grid connection is modest now. It’s insufficient for any big transfers. What I will say, and I’m sure this is foreshadowing what the premier will be saying soon, is dear Rachel [Notley], I’m here to help. Come and buy some of our electricity. But [Clark] made the decision to proceed without oversight from the utilities commission, last December. Jim Prentice was the next coming of conservatism in Alberta, with no expectation that there would be carbon pricing in Alberta.

To now say, which I’m certain she will, that there’s Alberta, the potential market for our surplus energy, that’s disingenuous and just dumb luck. And there is no guarantee at all that Rachel Notley is interested. She wants to create a domestic industry herself, just as every province wants to.

TF: I’m asking what’s your thought on it. Does it have potential?

JH: It definitely has potential. Actually, a national grid is something that’s been talked about for decades. But there hasn’t been a motivation for that, because we’ve been meeting our domestic needs, or we’ve been able to sell south of the border where we do have sufficient inter-ties.